OK, so my parents have recently informed me that the help I would be getting for College will fairly small, i.e definitely won’t come close to efc (around $13000, which will probably be a bit more because I’m a sophomore, meaning this year will be counted for College freshman year, and my Dad got a sizable raise, around 10000-15000). However, my Grandmother has said she would be willing to also contribute so that I at least won’t have to take out any private loans. However, I have read that Grandparents helping out with paying for College can hurt your EFC in future years, but it never mentioned specifically how. So if someone who has a grandparent paying for College can elaborate on how this could hurt my EFC, that would be great.
If your grandparent (or anyone other than your parents) pays your tuition directly, you have to report that for the NEXT year on the FAFSA, so it wouldn’t change Freshman year or sophomore, but could change jr/sr years. To avoid this, your grandmother could give a gift to your parents, and then they can use that money to pay your tuition without having to report it.
It also may not matter if you don’t qualify for need based aid.
Interesting… Why would 't my parents have to report it, though?
Gifts to parents aren’t reportable on FAFSA but they are on CSS profile.
Oh I guess that makes sense. Thank you!.
Another option (if it is a CSS Profile school) is for grandparents to pay back loans on your behalf after you graduate.
Huh, haven’t ever thought of that. Will talk to them about that option too.
@kokotg That’s a great idea. We’re not in a position that requires that, but I know people who would be helped by that.
Planning on your grandparents repaying your loans sounds risky. First, who is getting those loans? Your parents? Second, what if in 4 years, your grandparents are no longer in a position to repay the loans - they have passed away, are in an assisted living or skilled nursing facility, etc?
Those are certainly risks…but it is an option that doesn’t affect financial aid. There’s really no perfect way (that I know of) for grandparents to help out with tuition at CSS Profile schools (for kids who qualify for need based aid, that is)
Interesting. What are the effects if the grandparents contribute to a student’s 529 account?
I don’t know how old your Grandparents are, what their finances are like or their health. I assume they have some discretionary money they don’t need, but that does not make them wealthy. So take these thoughts with a grain of salt. If your grandparents end up in a nursing home in the next five years and need medicare to help pay for it, Medicare can look back 5 years and claw back any gifts that did not benefit your Grandparents. Not knowing their health, I suggest they contribute to a 529 account now instead of waiting a couple of years. Who knows what may happen between now and then. They could get sick and pass away, get sick and end up in a nursing home, who knows? I suggest they consult a financial planner. Good luck.
I was researching Grandparents owning a 529 plan and from what I’ve read on the ND 529 site, the withdrawals will count as income to the student for the year the withdrawal is made.
Some comments here;
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Yes, Grandparents withdrawals from 529s do count as student income. You can avoid this problem by not making any withdrawals till Jan 1 of the sophomore year of college. With “prior prior” year now used for income reporting of the FAFSA and Profile, any withdrawals after Jan 1 of the sophomore year will never get used in calculations.
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I believe the point I just made is true for any gift from the grandparent (gifts would usually be considered untaxed income on some of these forms (Profile).
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One caveat to these points - Although not considered for a base year in calculations after Jan 1 of the sophomore year, the Profile does ask questions about income for the current and future year. These are typically just estimates and it is unclear to me how they are actually used by each college.